Thailand needs to sharpen its competitiveness as it has been sliding in all key areas of development, particularly rules and laws, education and productivity, while losing attractiveness to other countries, especially those in Asean, which is moving towards full integration by 2015, according to a European report.

The first "European Business Position Paper", authored by the EU-funded European Asean Business Centre in Thailand, shows that foreign direct investment into Thailand has been fluctuating, but on an overall downward trend, since 2006.

"Notwithstanding the current crisis in Europe, the EU will maintain its role as a major trade and investment partner in Thailand. The development of the country's competitiveness is favourable, as EU companies will be ensured a level playing field and a competitive environment," EU Ambassador David Lipman said yesterday.

FTA

The top priority for the EU and businesspeople is negotiating and concluding a free-trade agreement with Thailand, as that will clearly help improve the trade and investment climate for EU enterprises, he said.

The EU is now making good progress in bilateral trade negotiations with Singapore and Malaysia. It is expecting to wrap up those talks this year, while beginning discussions with Vietnam shortly.

Other Asean members, including the Philippines and Indonesia, have also shown keen interest and informal talks are now advancing, he added.

Kirida Bhaopichitr, a senior economist at the World Bank, said Thailand was not only losing competitiveness and drawing fewer investors, but was also facing difficulties in escaping from the middle-income trap.

This is because training and the education system are not preparing sufficient human resources to move up the value-added ladder.

Outdated regulations prevent talented foreign professionals from entering the labour market and the Foreign Business Act (FBA) protects the service sector from outside investors.

To improve competitiveness, Thailand should promote more investment in the professional sector and use the opportunity presented by Asean integration to develop its competitiveness in all areas, she added.

According to the World Bank Knowledge Economy Index, Thailand's skill status in creativity and leadership has fallen by six places to 66th this year.

Transparency

Graeme Harlow, managing director of Diageo Moet Hennessy (Thailand), a producer of wines and spirits, has called on Thailand to improve transparency and productivity to draw more investment from the EU.

Foreigners are not in favour of inconsistent regulations. The government should set a clear timeline and rules for product legislation under the FBA, introduce clearer customs rules, and reduce some excise duties, as they have put foreigners at a disadvantage, he said.

Simon Makinson, chief executive officer of Allen & Overy (Thailand), urged the Thai government to liberalise the service business under the FBA.

Land ownership tenures should be lengthened and clear regulations prescribed for providing work permits.

Alexander Paufler, president and CEO of Mercedes-Benz, said Thailand is going into a very competitive environment under the AEC by 2015. The government needs to improve education to promote more skilled labour, and make sure that Thailand will not be left behind by urgently starting free-trade talks with the EU.

Bob Fox, regional representative of NavComp, said it is a good time for Thailand to relax foreign equity limits, as the information and communications technology industry is undergoing rapid development. Thailand's telecom industry is not providing leading services for business. The government has missed out on the issue of ownership structure, which will obstruct development for local enterprises, he said.

The piracy problem remains very acute, particularly for software, movies and the Internet. The problem has created a loss of several hundred million US dollars for the copyright industry. To boost Thailand's competitiveness, fines for IPR crimes should be stiffened and the country should be promoted as a knowledge-based society, he said.

According to the EABC report, Thailand's competitiveness ranking on a global scale has been slipping steadily since 2007 in terms of basic requirements, efficiency enhancers, innovation and sophistication factors, economic performance, government efficiency, business efficiency, infrastructure, and ease of doing business.

Political instability and corruption are also hindrances to business and are eroding Thailand's competitiveness.